The Economy

Service Industries Offset Manufacturing Slump

A non-manufacturing benchmark shows service providers unexpectedly expanded in October at the second-fastest pace in a decade.
Katie Kuehner-HebertNovember 4, 2015

While manufacturers remain bogged down by sluggish overseas demand, service industries expanded in October at the second-fastest pace in a decade.

The Institute for Supply Management’s non-manufacturing index advanced to 59.1 from 56.9 the prior month, the Tempe, Arizona-based group said Wednesday. A gauge above 50 denotes expansion, and the reading exceeded all estimates in a Bloomberg survey.

The ISM’s measure of services employment advanced to 59.2, the second-highest since August 2005, from 58.3 in September. The new orders gauge increased to 62 in October from 56.7 the prior month.

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The median forecast in the Bloomberg survey of 74 economists was 56.5, with estimates ranging from 54.5 to 58.1.

The ISM’s non-manufacturing index was 9 points higher than its measure of factory activity, the widest differential since February 2001. The manufacturing index was little changed last month at 50.1, the weakest since May 2013 and a sign that factories continue to suffer from soft overseas demand.

Service providers were aided by firmer home sales, job gains, low inflation, and cheap borrowing costs, “a reassuring sign that the economy will withstand malaise in manufacturing,” according to Bloomberg.

“Given that the consumer continues to do the heavy lifting for the economy, that’s going to benefit services,” Ryan Sweet, a senior economist at Moody’s Analytics, told Bloomberg. “The job market’s tightening, we’re starting to see some glimpses of an acceleration in wage growth, and all that bodes well for the non-manufacturing part of the economy.”

The business activity index, which parallels the ISM’s factory production gauge, rose to 63 from 60.2. A measure of prices paid increased to 49.1 from 48.4, indicating costs were falling at a slower pace. escort girl geneva

“Domestic demand, which encouraged stepped-up service-related hiring last month, helps explain why the Federal Reserve may raise interest rates next month,” Bloomberg said.

The ISM services report covers an array of industries, from retailing to health care. It also covers agriculture and construction.